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| USAID
Information:
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Montenegro
Please note: All linked documents are in PDF format
| Objective |
SO Number |
FY 2004 |
FY 2005 |
FY 2006 |
| Economic Policy and Finance |
170-0130 |
8,794 |
5,692 |
3,738 |
| Democracy and Governance |
170-0200 |
6,255 |
1,398 |
1,320 |
| Community Development and Local Governance |
170-0210 |
13,745 |
4,410 |
5,292 |
| Cross-Cutting Programs |
170-0420 |
1,900 |
1,500 |
1,650 |
| Transfers |
|
4,100 |
4,000 |
3,000 |
| Total (in thousands of dollars) |
34,794 |
20,000 |
15,000 |
|
The Development Challenge:
Montenegro is one of two republics of the country of the State Union of Serbia and Montenegro. According to the final results of the November 2003 population census issued by the Bureau of Statistics, Montenegro is approximately one-sixth the geographical size of Serbia with 616,000 inhabitants (less than one tenth of Serbia's population). The ethnic composition is considered to be predominantly Montenegrin (43.16%) and Serbian (31.99%). The remaining 24.85% of the population is made of Bosniak (7.77%), Albanian (5.03%), Muslim (3.97%), Croatian (1.1%), Roma (0.42%), and other (6.56%) population.
Driven by the goal of European Union integration, the Government of Montenegro (GOM) launched a substantial Economic Reform Agenda in March 2003. The legislative and institutional frameworks needed for moving toward a consolidated democratic system, free market, and Euro-Atlantic integration have progressed significantly but are not yet complete. The profound divisions present in Montenegro over the issue of redefining or terminating the relationship between Montenegro and Serbia, the systemic deficiencies, and the endemic corruption, political patronage and nepotism continue to constrain the reform process. Opportunity to address critical political issues in 2004 stalled as the opposition party boycotted Parliament through October. On the other hand, in the absence of a parliamentary opposition, the governing party succeeded in passing 67 pieces of important reform legislation.
Public opinion tracking shows that satisfaction with the government and its performance has increased 3%. Inflation continued to fall from 7.5% in 2003 to 5% in 2004, the financial sector showed marked improvement and new commercial laws were implemented at a reasonable pace. Although Montenegro continues to have a relatively high current account deficit, the gap appears to be more than made up by unrecorded financing flows, including some portion of flows from tourism receipts that fall into the gray economy. Nevertheless the active economic reforms have not yet led to markedly higher levels of growth or decreased unemployment. The 2003 Poverty Reduction Strategy Paper reported an absolute poverty rate in Montenegro of 12.2%, with more than one third of the population classified as economically vulnerable. Given regional variations, this figure is 19.3% in the north, representing 45% of the total poor in the republic. The average recorded net monthly wage in the formal sector according to official statistics is about 145 Euros (or according to other sources about 250 Euros per month when the informal sector is accounted for). Gross domestic product remains near 1990 levels (about 1.4 billion Euros) and unemployment once adjusted for the gray market is around 17%. The ongoing struggle with corruption continues to impede private sector growth as continuing distrust in the system drives entrepreneurs into the gray economy.
The GOM must address the task of passing remaining legislation to address social, economic, and political problems in the coming year, and continue to demonstrate the capacity to implement those laws that have already been approved. The status of the State Union of Serbia and Montenegro will influence the reform process in Montenegro over the next year.
The USAID Program:
USAID activities, summarized below, will be carried out through three Strategic Objectives (SOs).
Strategic Objective 170-0130 (Accelerated Development and Growth of Private Enterprises) concentrates on economic growth and job creation, competitiveness building activities that seek to attract investment and drive exports, increased access to credit and financial services, preparation of Montenegro for membership in the World Trade Organization, restructuring of fiscal, financial, and banking systems, sound and prudential practices implemented in bank and non-bank financial institutions, reorganization and strengthening of tax administration, strengthening of private enterprise and free market institutions, and strengthening of commercial laws and related institutions.
Strategic Objective 170-0200 (More Effective, Responsive, and Accountable Democratic Institutions) will focus its assistance on improving justice sector/legal framework, significantly expanding its efforts during FY 2005 and FY 2006 in this area. In addition, it will focus on strengthening civil society capacity, legal aid, human rights programs, technical assistance for selected government institutions, participatory and fair election processes, and support for democratic political parties, and anti-trafficking efforts. Assistance to independent media and trade unions is slated to end during FY 2005.
Strategic Objective 170-0210 (Increased, Better Informed, Citizens' Participation in Political and Economic Decision-Making) manages local democratic and economic development processes at the community level, sub-municipal and municipal levels through which citizens, their local governments, local businesses and producer associations and other relevant public and private stakeholders act together to achieve responsive local governance and local and regional development. The SO will focus during FY 2005 and out-years on development projects that link economic opportunities with resources thus generating income and jobs, improve local living conditions, increase financial stability, and hold local governments accountable.
Other Program Elements:
In conjunction with U.S. Treasury advisors, USAID will continue to advance the policy and economic framework for sustainable economic growth and the emergence of a viable private sector. The Department of Treasury advisors will complement USAID's program and focus on financial crime investigation, tax implementation, and budget and banking reforms. The Department of State will support Public Diplomacy and similar high priority programs, such as policy reform and training. The Department of Agriculture will complement USAID activities to make this sector more competitive.
Other Donors: USAID remains the primary donor in Montenegro. The European Agency for Reconstruction (EAR), Germany, and the United Kingdom have smaller budgets and like USAID work in the areas of economic policy reform and enterprise development, civil society and independent media development, and rule of law. The World Bank and the European Bank for Reconstruction and Development programs are principally focused on economic growth and infrastructure investments. The International Finance Corporation's program is centered on small and medium enterprise development. The United Nations Development Program (UNDP) with funding from EAR, Germany, Canada and the Netherlands, is working in the environment, enterprise development and civil society development. The Open Society Institute, the Organization for Security and Cooperation in Europe and the Council of Europe have small rule of law programs. Funding for humanitarian aid is much smaller than in previous years, with remaining programs coordinated by the United Nations High Commissioner for Refugees. Coordination takes place at all levels, starting from the high-level collaborative framework of the Government of Montenegro's Economic Reform Agenda and continuing through regular meetings at the technical level of program managers and of technical assistance implementers. USAID participates in donor coordination committees on infrastructure, local government, and border crossing managed by EAR, an environment donor coordination body managed by UNDP, and a reproductive health strategic working group with the World Bank and British Department for International Development. In drafting their 5.5 million Euros Community Assistance for Reconstruction, Development and Stabilization regional program to be implemented in 2005-07 primarily by the EAR, the European Commission coordinated with USAID to ensure their efforts would complement US activities.
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